High Court Dismisses Revenue's Challenge to Settlement Commission Order in Income Tax Case — Settlement Commission's Acceptance of Additional Income and Grant of Immunity Upheld. The Settlement Commission's order under Section 245C of Income Tax Act, 1961 is final and cannot be assailed by Revenue under Article 226 except on limited grounds.

High Court: Karnataka High Court Bench: BENGALURU In Favour of Accused

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2026-05-18 12:02:20

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Case Note & Summary

The Revenue filed a writ petition under Article 226 of the Constitution challenging the order of the Income Tax Settlement Commission dated 11.03.2020. The Settlement Commission had accepted the application of the assessee, Smt. Umah Agarwal, for settlement under Section 245C of the Income Tax Act, 1961 for Assessment Years 2012-2013 to 2019-2020. The Commission found that the additional income of Rs.2,20,00,000/- offered by the assessee was reasonable and fair, granted immunity from penalty and prosecution, and directed levy of interest under Section 234B(2A). The Revenue contended that the additional income should have been taxed under Section 115BBE at a higher rate and that the immunity was improperly granted. The High Court, after hearing the parties, held that the Settlement Commission's order is final under Section 245-I and cannot be challenged by the Revenue except on limited grounds. The court found no jurisdictional error or violation of natural justice in the Commission's order. The court noted that the Commission had considered all relevant materials and the Revenue's objections. The court dismissed the writ petition, upholding the Settlement Commission's order in its entirety. The court also observed that the levy of interest under Section 234B(2A) was proper. The judgment emphasizes the finality of settlement orders and the limited scope of judicial review under Article 226.

Headnote

A) Income Tax - Settlement Commission - Finality of Order - Section 245-I, Income Tax Act, 1961 - The order of the Settlement Commission is final and conclusive and cannot be challenged by the Revenue under Article 226 of the Constitution except on limited grounds of jurisdictional error or violation of natural justice. The court held that the Settlement Commission's order was within its jurisdiction and no interference was warranted. (Paras 2-5)

B) Income Tax - Settlement Commission - Additional Income - Reasonableness - Section 245C, Income Tax Act, 1961 - The Settlement Commission accepted the additional income of Rs.2,20,00,000/- offered by the assessee as reasonable and fair. The court upheld this finding, noting that the Commission had considered all relevant materials and the Revenue's objections. (Paras 1-3)

C) Income Tax - Settlement Commission - Immunity from Penalty and Prosecution - Section 245H, Income Tax Act, 1961 - The Settlement Commission granted immunity from penalty and prosecution, which is within its powers. The court held that the grant of immunity was proper and not arbitrary. (Paras 1-3)

D) Income Tax - Interest Levy - Section 234B(2A), Income Tax Act, 1961 - The Settlement Commission directed levy of interest under Section 234B(2A) for the relevant assessment years. The court found no error in this direction. (Para 1)

Issue of Consideration

Whether the Settlement Commission's order accepting the additional income of Rs.2,20,00,000/- and granting immunity from penalty and prosecution is valid and whether the Revenue can challenge it via writ petition despite the finality under Section 245-I of the Income Tax Act, 1961.

Final Decision

The High Court dismissed the writ petition, upholding the order of the Income Tax Settlement Commission dated 11.03.2020. The court held that the Settlement Commission's order is final under Section 245-I and no interference was warranted under Article 226.

Law Points

Settlement Commission's order is final under Section 245-I
writ jurisdiction under Article 226 is limited
Section 115BBE not applicable to settled income
Section 234B(2A) interest levy proper

Case Details

NC: 2024:KHC:31915

WP No.11153 of 2020 (T-IT)

2024-08-09

S. Sunil Dutt Yadav

NC: 2024:KHC:31915

Sri. Ravi Raj Y.V. (Senior Standing Counsel for Petitioner), Sri. K.K.Chaithanya (Senior Advocate for R1), Sri. Shanti Bhushan (D.S.G.I. for R2)

The Pr. Commissioner of Income Tax, Central Circle, Bengaluru

Smt. Umah Agarwal, The Income Tax Settlement Commission

Nature of Litigation

Writ petition under Article 226 of the Constitution challenging the order of the Income Tax Settlement Commission.

Remedy Sought

Revenue sought quashing of the Settlement Commission's order dated 11.03.2020 and a declaration that the assessee is liable to pay tax under Section 115BBE of the Act.

Filing Reason

Revenue aggrieved by the Settlement Commission's acceptance of additional income of Rs.2,20,00,000/- as reasonable and fair, and grant of immunity from penalty and prosecution.

Previous Decisions

Settlement Commission passed order dated 11.03.2020 accepting the settlement application under Section 245C for Assessment Years 2012-2013 to 2019-2020.

Issues

Whether the Settlement Commission's order is final under Section 245-I and can be challenged by the Revenue under Article 226? Whether the Settlement Commission's acceptance of additional income of Rs.2,20,00,000/- as reasonable and fair is valid? Whether the grant of immunity from penalty and prosecution by the Settlement Commission is proper? Whether the levy of interest under Section 234B(2A) is correct?

Submissions/Arguments

Revenue argued that the additional income should have been taxed under Section 115BBE at a higher rate and that the immunity was improperly granted. Assessee argued that the Settlement Commission's order is final and cannot be challenged by the Revenue under Article 226 except on limited grounds.

Ratio Decidendi

The order of the Settlement Commission under Section 245C is final and conclusive under Section 245-I of the Income Tax Act, 1961, and cannot be challenged by the Revenue under Article 226 of the Constitution except on limited grounds of jurisdictional error or violation of natural justice. The Settlement Commission's acceptance of additional income and grant of immunity was within its jurisdiction and reasonable.

Judgment Excerpts

The present petition is filed by the Revenue seeking for setting aside of the order passed by the Settlement Commission dated 11.03.2020... The Revenue being aggrieved by the order of the Settlement Commission and in light of finality to the order of the Settlement Commission in terms of Section 245-I has approached this Court...

Procedural History

The assessee filed a settlement application under Section 245C of the Income Tax Act, 1961 for Assessment Years 2012-2013 to 2019-2020. The Settlement Commission passed an order on 11.03.2020 accepting the application, finding the additional income of Rs.2,20,00,000/- as reasonable and fair, granting immunity from penalty and prosecution, and directing levy of interest under Section 234B(2A). The Revenue filed a writ petition under Article 226 challenging this order. The High Court heard the matter and reserved orders on 19.06.2024, and pronounced the judgment on 09.08.2024.